EXHIBIT 10.6
THIS AGREEMENT dated effective the 7th day of July 2002,
BETWEEN:
XXXXXX SYNDICATE, a syndicate formed by Xxxxxxx Xxxxx ("Xxxxx"), Xxxxx
Xxxxx ("Xxxxx") and Xxxxxx Xxxxxx ("Xxxxxx") to acquire and explore
mineral claims in the Yukon Territory (Xxxxx, Xxxxx and Xxxxxx are
hereinafter collectively referred to as "Xxxxxx")
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YUKON GOLD CORP., a corporation formed pursuant to the laws of Ontario
("Yukon Gold")
AND REFERENCED AS THE:
XXXXXX/YUKON GOLD AGREEMENT
WITNESSETH THAT:
WHEREAS Xxxxxx owns certain unpatented, mineral properties located in
the area of Mt. Xxxxxx in the Mayo Mining District of the Yukon Territory, which
mineral properties are more particularly described in Schedule A, attached
hereto, and are hereinafter collectively referred to as the "Property";
AND WHEREAS Xxxxx has assigned a portion of his interest to another
party the details of which and the percentage interest held by each party is
described in Schedule C attached hereto;
AND WHEREAS Xxxxxx has agreed that Yukon Gold may acquire an interest
in the Property, subject to the terms of this written agreement (the
"Agreement");
NOW, THEREFORE, the parties hereby do evidence their agreement with
respect to the Property as follows, in consideration of the premises and the
mutual covenants hereinafter set out.
1. REPRESENTATIONS AND WARRANTIES
1.1 YUKON GOLD'S REPRESENTATIONS AND WARRANTIES
Yukon Gold hereby represents and warrants to Xxxxxx that:
(a) it is a company duly incorporated under the laws of the
Province of Ontario, and it is duly organized and validly
subsisting under such laws and is qualified to carry on
business in the Yukon Territory;
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(b) it has the power and capacity to carry on its business and to
enter into this Agreement and any agreement or instrument
referred to or contemplated by this Agreement and to carry out
and perform all of its obligations and duties hereunder and
thereunder;
(c) it has duly obtained all necessary corporate authorizations
for the execution, delivery and performance of this Agreement
and such execution, delivery and performance and the
consummation of the transactions herein contemplated will not
contravene any applicable laws and will not conflict with or
result in any breach of any covenants or agreements contained
in, or constitute a default under, or result in the creation
of any encumbrance, lien or charge under the provisions of its
constating documents or any shareholders' or directors'
resolution or any indenture, agreement or other instrument
whatsoever to which it is a party or by which it is bound or
to which it or the Property may be subject; and
(d) this Agreement has been duly executed and delivered by it and
is valid and binding upon it in accordance with its terms.
1.2 XXXXXX'X REPRESENTATIONS AND WARRANTIES
Each of Xxxxx, Xxxxx and Xxxxxx, on his own behalf and not on behalf of
any of the others, hereby represents and warrants to Yukon Gold that:
(a) he has the right, power, authority and capacity to enter into
this Agreement and any agreement or instrument referred to or
contemplated by this Agreement and to carry out and perform
all of his obligations and duties hereunder and thereunder;
(b) this Agreement has been duly executed and delivered by him and
is valid and binding upon him in accordance with its terms;
(c) (i) Xxxxx and Xxxxxx are the beneficial and recorded or
registered owners of a 100% right, title and interest
in and to the mineral properties comprising the
Property and no person has any proprietary or
possessory interest in the Property other than Xxxxx,
Xxxxx and Xxxxxx, and
(ii) no person has any entitlement to any royalty or other
payment in the nature of rent or royalty on any
minerals, metals or concentrates or any other such
products removed from the Property, except as shown
in Schedule A, attached hereto;
(d) the Property is properly and accurately described in Schedule
A, attached hereto, and, each of the unpatented claims
embraced within the Property (the "Claims") (A) has been
properly located and recorded in the Yukon Territory and (B)
is in good standing under all applicable laws and regulations
with respect to the incurrence of any expenditures and the
payment of any monies or taxes and will remain so until at
least the date set out as the expiry date opposite each claim
on Schedule A;
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(e) the Property is free and clear of all liens, charges and
encumbrances, recorded or, to the best of his information,
knowledge and belief, unrecorded;
(f) there are no outstanding or, to the best of his information,
knowledge and belief, proposed, threatened or contemplated
actions or suits which, if successful, would or could affect
the market value or ownership of the Property or any portion
thereof;
(g) he is not a non-resident of Canada for the purpose of section
116 of the Income Tax Act (Canada);
(h) conditions on and relating to the Property are in compliance
with all applicable laws, regulations and orders relating to
environmental matters, including, but not limited to, waste
disposal and storage;
(i) there are no outstanding work orders or actions required to be
taken relating to the condition of the Property, or any
operations thereon, as of the date hereof;
(j) Xxxxxx has made available to Yukon Gold all information in its
possession or control relating to work done on or with respect
to the Property;
1.3 DURATION AND EFFECT OF REPRESENTATIONS AND WARRANTIES
(a) Xxxxx, Xxxxx and Xxxxxx each acknowledge and agree that Yukon
Gold is entering into this Agreement relying upon the
representations and warranties made to it herein and the
correctness of each such representation and warranty is a
condition upon which Yukon Gold is entering into this
Agreement, each of which conditions may be waived in whole or
in part solely by Yukon Gold and all such representations and
warranties shall survive the execution, delivery and
termination of this Agreement, the acquisition of any interest
in the Property by a party and the commencement and completion
of any of the transactions contemplated herein.
(b) Yukon Gold acknowledges and agrees that Xxxxx, Xxxxx and
Xxxxxx are each entering into this Agreement relying upon the
representations and warranties made to them herein and the
correctness of each such representation and warranty is a
condition upon which each of Xxxxx, Xxxxx and Xxxxxx is
entering into this Agreement, each of which conditions may be
waived in whole or in part solely by an instrument in writing
signed by each of Xxxxx, Xxxxx and Xxxxxx and all such
representations and warranties shall survive the execution,
delivery and termination of this Agreement, the acquisition of
any interest in the Property by a party and the commencement
and completion of any of the transactions contemplated herein.
(c) Xxxxx, Xxxxx and Xxxxxx each jointly and severally agree to
indemnify and hold harmless Yukon Gold from all claims,
actions, damages and losses arising out of or in connection
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with a breach of any representation or warranty made by Xxxxx,
Xxxxx and Xxxxxx contained herein.
(d) Yukon Gold agrees to indemnify and hold harmless each of
Xxxxx, Xxxxx and Xxxxxx from all claims, actions, damages and
losses arising out of or in connection with a breach of any
representation or warranty made by Yukon Gold contained
herein.
2. OPTION
2.1 GRANT OF OPTION
Xxxxxx hereby grants to Yukon Gold the sole and exclusive right and
option to acquire up to an undivided 75% (the "Earned Interest") right, title
and interest in and to the Property (the "Option") in accordance with the terms
of this Agreement.
2.2 TERMS OF OPTION
To exercise the Option and thereby earn an undivided 75% right, title
and interest in and to the Property, Yukon Gold shall incur costs in respect of
the Property and its exploration and development ("Costs"), or related thereto,
aggregating $5,600,000, in accordance with the following schedule:
PROPERTY PAYMENTS
a. On execution of this Agreement $ 25,000
b. On the first anniversary of this Agreement $ 75,000
c. On the second anniversary of this Agreement $ 150,000
d. On the third anniversary of this Agreement $ 150,000
e. On the fourth anniversary of this Agreement $ 200,000
TOTAL $ 600,000
WORK PROGRAM
a. During 2002$ 150,000
b. During 2003$ 250,000
c. During 2004$ 325,000
d. During 2005$1,500,000
e. During 2006 $2,775,000
TOTAL $5,000,000
EARNED INTEREST
Yukon Gold shall have earned a:
25% interest upon the Work Program expenditures of $1,500,000
50% interest upon the Work Program expenditures of $2,500,000
75% interest upon the Work Program expenditures of $5,000,000
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provided, however that: (a) funding for each calendar year Work Program is
available by July 7 in 2004 and by May 15 of the following calendar years in
which the expenditure is to be incurred; (b) Costs shall be deemed to have been
incurred when Yukon Gold has contractually obligated itself to pay for such
Costs or such Costs have been paid, whichever should first occur; (c) Costs
incurred in a particular period that exceed the Costs required to be incurred in
order to maintain the Option in good standing beyond such period (the "Prepaid
Costs") shall be credited as Costs incurred in the next subsequent period,
provided that Yukon Gold may, at any time, increase its Prepaid Costs and
accelerate its interest earned; (d) that in calculating the amount of Costs
incurred, Yukon Gold shall be entitled to include therein an overhead fee which
shall equal 10% of the first $250,000 and 5% for additional Costs over $250,000
incurred in the exploration and development of the Property, or related thereto
(other than general corporate overhead costs); and (e) each of Xxxxx, Xxxxx and
Xxxxxx may, subject to receipt of all necessary regulatory approvals, by notice
to Yukon Gold, elect to receive their pro-rata portion of the Property Payments
in respect of a particular year in common shares of Yukon Gold (or its
successor) issued at a price equal to 10% less than the market price as of the
date of receipt by Yukon Gold of the notice given hereunder.
Costs shall include cost of work on the Property to accomplish site
work, such as labour, materials, consultants, workers on the Property,
sub-contracts, room and board for site personnel, but shall exclude travel costs
to the Yukon, costs of non-working visiting consultants and public relations.
The initial proposed work programme will be submitted for approval by Yukon Gold
to Xxxxxx prior to the execution of this Agreement.
2.3 TITLE
(a) The parties hereto acknowledge that title to the Property has
been transferred to Yukon Gold and that additional claims have
been included in the Property in accordance with Article 5.4.
The Property now consists of the claims set out in Schedule
A1.
(b) Subject to the foregoing, each of the parties shall be
entitled to record and register evidence of its right, title
and interest in and to the Property or any portion thereof, at
any time and from time to time, and each party agrees to
execute and deliver all necessary documents to facilitate such
recordings and registrations.
2.4 DEFAULT AND TERMINATION
(a) All costs specified in section 2.2 hereof may or may not be
incurred by Yukon Gold, at its option and in its sole
discretion. Subject to section 2.4(d), should Yukon Gold fail
to incur any of the costs specified in section 2.2 within the
specified corresponding periods, this Agreement shall
terminate.
(b) This Agreement may be terminated by Yukon Gold, at any time by
Yukon Gold giving notice to Xxxxxx to that effect and, in such
event, the termination shall be effective on the date such
notice is received by Xxxxxx.
(c) Should this Agreement be terminated pursuant to the provisions
of this section 2.4: (i) Yukon Gold shall retain the right,
title or interest in or to the Earned Interest HELD by Yukon
gold as of the date of termination, provided that if when this
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Agreement is terminated Yukon Gold holds a 50% right, title
and interest in or to the Property, Yukon Gold's Earned
Interest in the Property shall automatically be reduced to
45%; (ii) Yukon Gold shall cause to be executed, within 60
days of such termination, any documentation reasonably
requested by Xxxxxx in order to evidence the forfeiture of its
unearned right, title and interest in and to the Property and,
if applicable, to retransfer the Property to Xxxxxx to be held
in accordance with Section 2.3 (a); (iii) Yukon Gold shall
advance sufficient funds to governmental authorities, file
sufficient work for assessment work credit and take all other
reasonable steps to ensure that the Property is in good
standing for a period of at least 1 year following the date of
such termination; (iv) Yukon Gold shall ensure that the
Property is free and clear of all liens, charges and
encumbrances arising from its activities hereunder; and (v)
Yukon Gold shall have the right to remove from the Property
all machinery, equipment, buildings, structures, supplies and
other property placed thereon by Yukon Gold or its agents
within a period of twelve (12) months following the date of
such termination, provided, however, that Yukon Gold shall
remove any such property at Yukon Gold's cost if specifically
requested by Xxxxxx within such twelve (12) month period.
(d) In the event Yukon Gold: (i) holds at least a 25% right, title
and interest in the Property; (ii) is unable to meet its next
year's payments and expenditures as set out in section 2.2 of
this Agreement; and (iii) has not previously extended its
obligations under section 2.2 of the Agreement pursuant to
this section 2.4(d), Yukon Gold may postpone each of the
remaining years' payments set out in section 2.2 of this
Agreement by a period of time not to exceed one year by giving
notice to Xxxxxx to such effect.
2.5 EXCLUSION OF CLAIMS
(a) During the Option Period, should Yukon Gold wish to abandon
or, with respect to a Claim, held by Xxxxxx or Yukon Gold in
trust pursuant to section 2.3(a), exclude from the definition
of Property any of the Claims, then comprising part of the
Property (the "Abandoned Property"), the following provisions
shall apply. Yukon Gold shall give Xxxxxx 30 days notice of
its intention to abandon or exclude such property and Xxxxxx
may thereafter give notice to Yukon Gold electing to have all
of Yukon Gold's right, title and interest in and to the
Abandoned Property transferred to it. Should Xxxxxx give such
notice to Yukon Gold, Yukon Gold shall forthwith execute, at
its cost, any documentation necessary to transfer all of its
right, title and interest in and to the Abandoned Property to
Xxxxxx and Yukon Gold shall take such action as is reasonably
necessary, at its cost, to ensure that the Abandoned Property
will remain in good standing for a period of at least 1 year
from the date of Yukon Gold's notice. If Xxxxxx does not so
elect or fails to respond to Yukon Gold's notice within such
30 day period, then Yukon Gold may abandon or exclude the
Abandoned Property.
(b) Subsequent to the abandonment, transfer or exclusion of an
Abandoned Property, or interest therein, pursuant to this
section 2.5, the definition of Property hereunder shall no
longer include the Abandoned Property and Yukon Gold shall
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have no further obligations or responsibilities in respect of
the Abandoned Property, except for those obligations and
responsibilities in respect of environmental laws and arising
in respect of operations conducted by Yukon Gold prior to such
abandonment, transfer or exclusion irrespective of whether
costs in respect of such obligations and responsibilities
accrued before or after such abandonment, transfer or
exclusion.
2.6 OPTION PERIOD RIGHTS AND OBLIGATIONS
(a) During the Option Period: (i) Yukon Gold shall perform and
file assessment work necessary to maintain, and otherwise keep
the Property in good standing, provided however, that Yukon
Gold shall file all drilling and other qualified expenditures
for assessment work credit even if not necessary to keep the
Property in good standing; (ii) Yukon Gold shall be entitled
to all income and other tax deductions, allowances and
credits, and to all incentive grants or other benefits
available pursuant to exploration incentive programs or
similar programs, insofar as such work, deductions,
allowances, credits, grants and benefits relate to the
Property; (iii) Yukon Gold shall have the exclusive right to
conduct exploration and development work on the Property with
the right to remove mineral samples therefrom, including bulk
mineral samples, for the purpose of assays and tests provided
that any excess revenue from the disposition of such samples
shall be shared by Xxxxxx as to 25% and Yukon Gold as to 75%;
(iv)Yukon Gold shall have the right to erect, bring and
install all such buildings, machinery, equipment and supplies
on the Property as Yukon Gold shall deem necessary and proper;
and (v) all work done by Yukon Gold on the Property shall be
done in accordance with good mining practice and in compliance
with the applicable laws of the Yukon Territory.
(b) During the Option Period: (i) Xxxxxx shall have access to the
Property and to the records of Yukon Gold, at its sole risk
and expense, to review work being carried out on the Property
or to review results obtained from work carried out on the
Property, as the case may be, provided however, that
reasonable notice is given and that such access shall not
unduly interfere with or disrupt the activities of Yukon Gold;
(ii) Xxxxx, Xxxxx and Xxxxxx shall be entitled to carry out
any work required on the Property if the price for their
proposed work is competitive to that typical in the industry
for work done on properties substantially the same as the
Property; (iii) Equipment work provided by Xxxxx is to be
based on Third Party Equipment Rental Rates for the Yukon
Territory Government, with allowance for off-road work (i.e.
mountain) and this entitlement shall continue after the
formation of the joint venture; (iv) Yukon Gold shall provide
Xxxxxx with monthly reports indicating the status of work
being conducted on the Property, along with an estimate of the
costs incurred during such month, provided, however, that such
reports shall not be required during those periods in which
there is no work being conducted in respect of the Property;
and (v) Yukon Gold shall provide Xxxxxx with annual reports
disclosing any significant technical data learned or obtained
in connection with work in respect of the Property, as well as
a breakdown of the costs incurred in carrying out such work,
provided, however, that annual reports shall be provided in
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respect of a calendar year on or before the first day of April
following the end of such calendar year.
(c) Yukon Gold shall indemnify and save harmless each of Xxxxx,
Xxxxx and Xxxxxx from and against all suits, claims, demands,
losses and expenses which they may each suffer by reason of
any act or thing done or omitted to be done during the Option
Period by or on behalf of Yukon Gold in relation to its
exploration and development operations on the Property,
including any consequences arising from the non-payment of
workmen and wage earners employed by it or its contractors on
or in connection with the Property or suppliers of materials
purchased in connection therewith. During the Option Period,
Yukon Gold shall keep the Property free from claims for liens,
charges and encumbrances and, in the event of a lien, charge
or encumbrance being recorded, it will on this fact becoming
known to it forthwith take proceedings to have such lien,
charge or encumbrance removed as soon as possible. Yukon Gold
may, however, dispute and contest any suit, claim, demand,
loss or expense which forms the basis of a recorded lien,
charge or encumbrance.
2.7 EXERCISE OF OPTION
(a) If Yukon Gold should incur payments in respect of the Property
and exploration and development costs thereon aggregating
$5,600,000, in accordance with section 2.2, Yukon Gold shall
have exercised the Option and thereby earned an undivided 75%
right, title and interest in and to the Property. Yukon Gold
may thereupon give notice to Xxxxxx that it has exercised the
Option. Yukon Gold and Xxxxxx shall be deemed to have formed a
joint venture (the "Joint Venture") for the further
exploration and development of the Property, which shall be
governed by Article 3 of this Agreement upon the exercise of
the Option.
(b) Yukon Gold Shall be entitled, at any time prior to the
formation of the Joint Venture, to put forward a proposal to
put the Property into production (a "Production Decision")
provided (i) such Production Decision is supported by a
feasibility study prepared by an independent engineer; and
(ii) the operation of the portion of the Property covered by
the Production Decision shall continue as a Joint Venture as
set out in section 3; and (iii) Yukon Gold shall not be
relieved of continuing to incur Costs in accordance with
section 2.2 with Work Programs being carried out on areas of
the Property that are not included in the Production Decision;
and (iv) Yukon Gold and Xxxxxx shall share costs and income
from productions as to 75% Yukon Gold and 25% Xxxxxx.
Provided Xxxxxx may elect not to contribute to the costs
related to the Production Decision and Xxxxxx shall not suffer
and dilution subject to:
(i) Yukon Gold shall be entitled to apply the costs
incurred on Xxxxxx'x behalf to the balance of any
amount it is required to spend on Work Programs in
section 2.2; OR
(ii) Xxxxxx may elect to allow Yukon Gold to recover 150%
of the cost funded on Xxxxxx'x behalf from the
production revenue before Xxxxxx is entitled to
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receive its share of production revenue and Yukon
Gold shall continue to incur the Work Program costs
in accordance with section 2.2.
(iii) Once Yukon Gold has paid or incurred all the Costs
Xxxxxx shall be subject to all of the terms and
conditions of section 3.
(c) Upon the Joint Venture being formed, each party shall have,
subject to the terms of this Agreement and its respective
undivided right, title and interest in and to the Property
(the "Participating Interest"), the right to participate in
the Joint Venture and the corresponding obligation to fund
further exploration and development of the Property. The
Participating Interests, at the time of the formation of the
Joint Venture, shall be:
Yukon Gold 75%, and
Hinton 25%,
provided, however, that should Yukon Gold incur and pay for
costs in respect of the Work Programs on the Property, or
related thereto, prior to the formation of the Joint Venture,
in excess of $5,000,000, then Yukon Gold may give notice to
Xxxxxx to such effect prior to or upon the formation of the
Joint Venture and, upon receipt of such notice by Xxxxxx,
Yukon Gold's deemed costs pursuant to section 3.4(d) shall be
equal to Yukon Gold's incurred costs and, within 90 days of
Xxxxxx'x receipt of such notice, Xxxxxx shall provide the
funds required (the "Required Funds") so that when: the
Required Funds are added to its deemed costs of $1,666,666 as
set forth in section 3.4(d) (such result hereinafter referred
to as the "Total"), the Total is divided by the product
obtained when Yukon Gold's deemed costs pursuant to section
2.7(a) are divided by 0.75 (such result hereinafter being
referred to as the "Total Division") and the Total Division is
expressed as a percentage (such result hereinafter referred to
as the "Resulting Percentage"), the Resulting Percentage is
25% and, in such event, Xxxxxx'x deemed costs shall be equal
to the product obtained when the Required Funds are added to
$1,666,666; otherwise Xxxxxx shall be subject to dilution in
accordance with the provisions of section 3.4(d).
3. THE JOINT VENTURE
3.1 JOINT VENTURE RELATIONSHIP
Except as provided in this Agreement, the parties shall share all
benefits, costs, expenses, liabilities and obligations in respect of the Joint
Venture severally in proportion to their respective Participating Interests at
the time that such benefits, costs, expenses, liabilities and obligations were
earned, received or incurred, as the case may be. The parties agree that the
relationship between them shall be governed solely by the provisions of this
Agreement.
3.2 JOINT VENTURE COMMITTEE
(a) Upon formation of the Joint Venture, a joint venture committee
shall be forthwith established consisting of one
representative of each of Yukon Gold and Xxxxxx (the "Joint
Venture Committee"). Each of the parties shall also nominate
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an alternate representative to the Joint Venture Committee who
shall represent it in the absence of an appointed
representative. Either of the parties may give notice to the
other party and replace any of its representatives to the
Joint Venture Committee, from time to time, and such
replacement shall be effective on the date of such other
party's receipt of such notice.
(b) The Joint Venture Committee shall be responsible for approving
work plans and budgets (the "Work Plans" and "Budgets") and
shall determine the general policies and direction to be
adopted by the operator (the "Operator") in the conduct of
operations in respect to the Property. Each Work Plan and
Budget shall be prepared in respect of a period of time which
is equal to or less than one year, shall contain an itemized
projection of costs to be incurred thereunder, and shall
detail the nature of the work to be performed thereby, the
expected schedule of implementation thereof and the expected
schedule of payments thereunder. The Operator shall be
entitled to submit, and the Joint Venture Committee shall be
entitled to approve, phased Work Plans and Budgets in which
the implementation of successive phases shall be dependent
upon the results of previous phases.
(c) The Joint Venture Committee shall meet on 20 days notice given
by the Operator and on 30 days notice given by the party which
is not the Operator (the "Non-Operator") and the Joint Venture
Committee shall meet at least once in each calendar year. Any
notice in respect of such meeting shall include an agenda of
items to be discussed at the meeting. Upon receipt of such
notice, a party may give notice to the other party of items to
be added to the agenda, provided, however, that an item may
not be added to the agenda, unless such notice to add such
item is given on or before the tenth day prior to such
meeting. Except by a unanimous vote of both parties, the Joint
Venture Committee shall not decide upon matters at a meeting
not included in the agenda for such meeting.
(d) Decisions of the Joint Venture Committee shall be by majority
vote. Each party's representative shall be entitled to a vote
equal to the percentage Participating Interest held by such
party. In the event of a deadlocked vote, the Operator shall
cast a deciding vote.
3.3 OPERATOR
(a) Yukon Gold shall be the Operator of the Property upon
formation of the Joint Venture. After Yukon Gold has had its
full opportunity to earn the 75% interest, if the Non-Operator
holds a greater Participating Interest than the Operator, it
shall be entitled to give notice to the Operator and replace
the Operator, provided, however, that such replacement shall
not be effective until the 30th day following the receipt of
such notice by the Operator.
(b) The Operator shall have exclusive charge of all operations and
shall conduct such operations in accordance with Work Plans
and Budgets approved by the Joint Venture Committee, provided
that Xxxxx, Xxxxx and Xxxxxx shall be entitled to carry out
any work required on the Property if the price for their
proposed work is competitive to that typical in the industry
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for work done on properties substantially the same as the
Property. All work done by the Operator on the Property shall
be done in accordance with good mining practice and in
compliance with all applicable laws and regulations.
(c) (i) The Operator shall be entitled to include in each
Work Plan and Budget and charge to the Joint Venture
Account an overhead fee for the performance of its
obligations and the discharge of its functions
hereunder, which shall equal 5% of all costs in
respect of the Property.
(ii) In the event that commercial production is commenced
upon the Property, the overhead fee shall be
negotiated by the parties based upon the usual
business practice for an operating mine, it being the
intention of the parties that the Operator should
neither procure a profit nor suffer a loss as a
result of its acting as Operator hereunder.
(d) The Operator shall submit Work Plans and Budgets to the Joint
Venture Committee for approval within 90 days subsequent to
the formation of the Joint Venture or within 90 days
subsequent to the expiration of the Work Plan and Budget last
in effect, as the case may be. If the Joint Venture Committee
should fail to approve the Work Plan and Budget proposed by
the Operator or the Operator should fail to submit a Work Plan
and Budget within such 90 day time period, then a party which
is not the Operator may, not more than 60 days thereafter,
propose a Work Plan and Budget for the ensuing year for
consideration and approval by the Joint Venture Committee.
Should the Joint Venture Committee approve the Work Plan and
Budget proposed by such party, then the party which is not the
Operator shall temporarily replace the Operator for the
purpose of forthwith implementing and carrying out such
approved Work Plan and Budget.
(e) A party that temporarily replaces the Operator pursuant to
section 3.3(d) (the "Temporary Operator") shall be deemed to
be the Operator during the currency of the Work Plan and
Budget in respect of which the Temporary Operator is first
operating (the "Temporary Operator's First Work Plan and
Budget") and shall perform all of the obligations of the
Operator during such period, including the obligation of the
Operator to submit a Work Plan and Budget to the Joint Venture
Committee for approval within 90 days subsequent to the
expiration of the Temporary Operator's First Work Plan and
Budget. The provisions of this section 3.3 shall apply mutatis
mutandis after the expiration of the Temporary Operator's
First Work Plan and Budget with the Temporary Operator
continuing to act as the Operator unless replaced in
accordance with the provisions of this section 3.3.
(f) The Operator shall provide the Non-Operator with monthly
reports during the term of this Agreement indicating the
status of the work being conducted on the Property, provided,
however, that such reports shall not be required during those
periods in which there is no work being conducted in respect
of the Property. The Operator shall provide the Non-Operator
with reports within 70 days subsequent to the end of each Work
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Plan summarizing significant information acquired or learned
as a result of such Work Plan. Such reports shall include a
statement of costs incurred and monies spent in respect of
such Work Plan. In the event that the Operator receives,
obtains or discovers any information in respect of the
Property that would significantly affect the value of the
Property, such information shall be forthwith disclosed to the
Non-Operator. After the commencement of commercial production,
the Operator shall provide the Non-Operator with monthly
statements of ore and minerals, if any, produced from the
Property together with ores or minerals, if any, in storage.
Such reports shall indicate the share of production and
production in storage attributable to each party.
(g) The Non-Operator shall have access to the Property and to the
records of the Operator, at its sole risk and expense, to
review work being carried out on the Property or to review
results obtained from work carried out on the Property, as the
case may be, provided, however, that reasonable notice is
given to the Operator and that such access shall not unduly
interfere with or disrupt the activities of the Operator.
(h) The Operator shall pay all fees, annual rentals, assessments
and taxes, other than income taxes, in respect of the
Property, which shall be accounted for in the Work Plans and
Budgets, and shall keep the Property in good standing, free
and clear of all liens, charges and encumbrances arising from
its activities and shall take and continue such proceedings as
are reasonable in the circumstances to remove any liens,
charges and encumbrances not arising from its activities. The
Operator shall also maintain such insurance coverage
protecting the parties from third party claims as may be
required by the Joint Venture Committee, provided, however,
that should the Joint Venture Committee fail to require the
Operator to maintain any particular insurance coverage the
Operator shall maintain insurance coverage in accordance with
normal industry standards and practice specifying the parties
as named insured.
(i) The Non-Operator shall indemnify and save harmless the
Operator from and against a portion of all third party
liabilities, in accordance with its Participating Interest at
the time such liabilities are incurred. Such indemnification
and saving harmless of the Operator shall not be provided in
respect of losses or damages arising from the Operator's
failure to maintain such insurance coverage as may be required
in accordance with section 3.3(h) or arising from the bad
faith, wilful misconduct or gross negligence of the Operator,
provided, however, that the Operator shall in no event be
considered to be grossly negligent in respect of the
interpretation of any results in respect of a Work Plan. The
reduction or conversion to a royalty interest of a party's
Participating Interest shall not relieve a party of its share
of such third party liabilities arising out of operations
conducted prior to such reduction or conversion, including
long term reclamation or remediation obligations, irrespective
of whether costs in respect of such liabilities accrued before
or after such reduction or conversion. A party's share of any
such liability shall be equal to its Participating Interest at
the time that such liability was incurred.
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3.4 PARTICIPATION, DILUTION AND CONVERSION
(a) Each party shall elect, within 30 days of receipt of an
approved Work Plan and Budget, whether or not to participate
in the Work Plan and Budget and fund its share of the costs.
Failure to elect within such 30 day time period shall be
deemed to be an election not to participate.
(b) The Operator shall provide, on a quarterly basis at least 30
days in advance, monthly expenditure projections under each
Work Plan and Budget to the Non-Operator, provided the
Non-Operator has elected to contribute to such Work Plan and
Budget. Each party that has elected to contribute to such Work
Plan and Budget (the "Participating Party") shall advance
funds representing its share of the projected expenditures to
a separate and new account to be designated by the Operator
(the "Joint Venture Account") on or before the later of the
first day of the month in which such funds are scheduled to be
expended and the expiry of the 30 day advance notice period.
Failure by a Participating Party to provide its share of such
funds by such date shall result in such party being deemed to
have elected not to participate in the current Work Plan and
Budget and to have not advanced any funds in respect of such
Work Plan and Budget. The expenditure projections shall
include a description of the work being proposed as well as
the estimated costs required to fully complete such work.
(c) If the Operator should incur expenditures in a month exceeding
the expenditure projection for that month then the Operator
shall provide an account of such overrun to the Non-Operator,
provided the Non-Operator is a Participating Party. Upon
receipt of such account, the Participating Parties shall
advance to the Joint Venture Account, within 30 days, funds
representing their share of such overrun, provided, however,
that any expenditures made by the Operator in excess of 120%
of the total expenditure projection for the Work Plan and
Budget then in effect (the "Excess Expenditures") shall be the
sole responsibility of, and for the sole account of, the
Operator unless approved pursuant to this section 3.4(c).
Excess Expenditures shall be deemed to be approved if (i)
unanimously approved by the Joint Venture Committee, (ii)
pertaining to a Development Work Plan and Budget as defined in
section 3.5(d) or (iii) resulting from expenditures relating
to matters that were unanticipated or not certain to arise at
the time of preparation of the applicable Work Plan and
Budget, including expenditures relating to environmental or
safety concerns and litigation with respect to contractors
retained by the Operator but excluding expenditures relating
to changes in a Work Program that have not been approved by
the Joint Venture Committee. Excess Expenditures approved
pursuant to this section 3.4(c) shall be included in the
calculations provided for under section 3.4(d).
(d) If either party (the "Defaulting Party") elects not to
participate or is deemed to have elected not to participate in
a Work Plan and Budget then the Defaulting Party shall have
its Participating Interest diluted, in accordance with the
following formula, and such party shall be entitled to
participate in subsequent Work Plans and Budgets only to the
extent of its Participating Interest at the time such
subsequent Work Plans and Budgets are approved by the Joint
Venture Committee. A party's Participating Interest can be
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calculated by dividing A by B and expressing the result as a
percentage, where A is the total of all funds advanced by that
party in respect of Work Plans and Budgets and such party's
deemed expenditures and B is the total of all funds advanced
by both parties in respect of Work Plans and Budgets and such
parties' deemed expenditures. Subject to section 2.7, the
parties deemed expenditures upon formation of the Joint
Venture shall be as follows:
Yukon Gold: $5,000,000
Xxxxxx: $1,666,666
(e) Notwithstanding section 3.4(d), if a Defaulting Party had the
right to elect to participate and elected not to participate
or was deemed to have elected not to participate in a Work
Plan and Budget and, upon completion of such Work Plan, the
Operator has not incurred expenditures equal to at least 80%
of the Budget, the Operator shall forthwith notify the
Defaulting Party of the Operator's failure to incur such
minimum expenditures under such Work Plan and Budget and the
Defaulting Party shall be entitled to pay its proportionate
share of the expenditures incurred by the Operator under such
Work Plan and Budget in accordance with its Participating
Interest prior to the implementation of such Work Plan and
Budget. If such proportionate share of such expenditures under
such Work Plan and Budget is paid by the Defaulting Party
within 30 days of its receipt of such notice from the
Operator, the dilution suffered by the Defaulting Party
pursuant to the provisions of section 3.4(d), as a result of
the Defaulting Party's election or deemed election not to
participate in such Work Plan and Budget shall be deemed to
have never occurred and the Defaulting Party shall be deemed
to have paid, and the Operator shall be deemed not to have
paid, such proportionate share of such expenditures under such
Work Plan and Budget.
(f) Should Xxxxx, Xxxxx and Xxxxxx, collectively, or Yukon Gold
have its Participating Interest reduced to a percentage less
than 10%, then:
(i) such party (the "Royalty Holder") shall have its
Participating Interest converted to a 1.0% net
smelter returns royalty to be calculated and paid in
accordance with the provisions of Schedule B,
attached hereto, provided that a decision has been
made to put the Property into production;
(ii) the non-converting party (the "Owner") shall become
the owner of a 100% right, title and interest in and
to the Property, subject only to the Royalty Holder's
1.0% net smelter returns royalty, Xxxxxx'x 2% net
smelter returns royalty as set out in section 4.1 of
the Agreement; and
(iii) the Joint Venture shall be dissolved and the Joint
Venture Committee shall be disbanded, as of the date
of such conversion.
3.5 PROPERTY MATTERS
(a) Each party waives and renounces the benefit of all provisions
of law, as now in effect or as enacted in the future, relating
to actions of partition of real and personal property, and
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agrees that it will not resort to any actions in law or in
equity to partition the real and personal property subject to
this Agreement. In addition, each party acknowledges (i) that
dilution and conversion of a Participating Interest is a fair
means of measuring the anticipated economic impact of
non-participation in the applicable circumstances referred to
herein and (ii) that conversion to a royalty can lead to an
interest of greater value than the originally held
Participating Interest.
(b) The parties shall be entitled to (i) record their
Participating Interests in respect to the Claims comprising
the Property and (ii) register their Participating Interests
in the Property. The parties shall execute such documentation
as may be required, from time to time, to effect such
transfers of title.
(c) Should the Operator wish to abandon any of the Claims
comprising the Property, it shall give the Non-Operator notice
of its intention to do so and the Non-Operator may thereafter
give notice to the Operator, within 30 days of the Operator's
notice, electing to have such Claims transferred to it. Should
the Non-Operator make such an election, the Operator shall
forthwith execute any documentation necessary to transfer such
Claims to the Non-Operator and such mineral properties shall
be in good standing for a period of at least 90 days from the
date of the Operator's notice. If the Non-Operator does not
make such an election within such 30 day period, the Operator
may abandon such mineral properties. Subsequent to such 30 day
period, the definition of Property shall exclude such Claims,
and the Operator shall have no further obligations or
responsibilities in respect of such mineral properties, except
for those obligations and responsibilities in respect of
environmental laws arising in respect of operations conducted
by the Operator prior to such abandonment or transfer.
(d) Notwithstanding any other provision of this Agreement, the
following provisions of this section 3.5(d) shall apply in the
event the Operator recommends to the Joint Venture Committee,
at any time, to place any part of the Property into
production. In the event the Operator makes such
recommendation, the Operator shall make available to the
Non-Operator all of the data and information relied upon by
the Operator in making such recommendation and the Joint
Venture Committee shall meet to consider such recommendation
within a period which is not less than 30 days and not more
than 120 days after the date on which the Operator's
recommendation is received by the Joint Venture Committee. The
Joint Venture Committee shall either approve or disapprove
such recommendation or direct that further study into the
matter be undertaken by the Operator. If the Joint Venture
Committee should approve such recommendation then:
(i) the Joint Venture Committee shall forthwith determine
and approve a Work Plan and Budget that appears
adequate for purposes of bringing the Property into
commercial production (the "Development Work Plan and
Budget"), and
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(ii) each party shall have 90 days from the date of the
meeting of the Joint Venture Committee of which the
Development Work Plan and Budget was determined to
elect whether or not to contribute to the Development
Work Plan and Budget.
If a party elects not to participate or fails to elect
within such 90 day period to contribute to a Development
Work Plan and Budget, then such party shall be deemed to
have withdrawn as a Participating Party and its
Participating Interest shall be converted to a 1.0% net
smelter returns royalty to be calculated and paid in
accordance with the provisions of Schedule B attached
hereto. Should a party elect to participate in a
Development Work Plan and Budget and subsequently become a
Defaulting Party pursuant to section 3.4(d), then a
Participating Party may elect (A) to have the Defaulting
Party's Participating Interest diluted, in accordance with
section 3.4(d), (B) to give notice to the Defaulting Party
insisting upon participation by the Defaulting Party, in
which event the Participating party (1) shall have a lien
and charge on the Defaulting Party's share of all products
produced from the Property and on the Defaulting Party's
Participating Interest to the extent of the Defaulting
Party's share of the applicable Budget (the "Debt"), (2)
shall have the right to collect the Debt as a debt by any
procedure authorized by law, including the right of
foreclosure, and (3) shall be paid interest on the Debt,
which shall form part of the Debt, at a rate per annum
equal to the rate of interest (the "Prime Rate") from time
to time quoted by the Toronto Dominion Bank as the
reference rate of interest used by it to determine rates of
interest chargeable on Canadian dollar loans to its best
commercial customers payable on demand, plus 2% until paid,
and the Prime Rate for each month shall be deemed for the
entire month to be the Prime Rate on the first day of such
month or (C) to have the fair market value of the
Defaulting Party's Participating Interest determined by an
independent appraiser appointed by mutual agreement of the
parties or, failing such agreement, by arbitration pursuant
to the Arbitration Act (Ontario) and to purchase such
interest, if satisfied that such determination is fair in
the Participating Party's sole discretion.
(e) Each party shall own and have the right, privilege and
power to take in kind and separately dispose of a portion
of all products produced from the Property, in accordance
with its Participating Interest. The Operator shall
designate and notify the Non-Operator of the points of
delivery situate on the Property for the parties'
respective shares of such product and all costs in respect
of such product shall be for the joint account of the
parties, until such product is delivered to such points.
After such product is delivered to such points each party
shall pay its own costs in respect of such product. The
Operator shall use its best efforts to ensure that each
party receives product of like quality.
3.6 WITHDRAWAL FROM JOINT VENTURE
(a) Either Yukon Gold or Xxxxxx (the "Withdrawing Party") may, at
any time during the currency of the Joint Venture, voluntarily
withdraw from the Joint Venture and forfeit its right, title
and interest in and to the Property and its rights under this
Agreement by giving written notice of such withdrawal to the
other party (the "Remaining Party"), which notice shall
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indicate an effective date for such withdrawal of not earlier
than 90 days subsequent to the delivery of such notice. In
such event, subject to section 3.6(b).
(i) The Withdrawing Party shall:
(A) remain liable for its share of all amounts
chargeable to it, as well as its share of
any liabilities and obligations incurred
hereunder by the Operator on behalf of the
Joint Venture up to the effective date of
the withdrawal,
(B) secure to the satisfaction of the Remaining
Party its share of the costs of reclaiming
the Property, as estimated at the effective
date of withdrawal considering all
applicable laws and regulations and the
policies of any governmental, regulatory or
other body having jurisdiction,
(C) remain obligated under section 5.2 for a
period of two years after the effective date
of the withdrawal,
(D) remain obligated to execute and deliver such
documents as may be necessary to evidence
the forfeiture of its Participating Interest
to the Remaining Party, and
(E) not be entitled to any royalty hereunder;
(i) the Remaining Party shall become
the owner of a 100% right, title
and interest in and to the Property
as of the effective date of the
withdrawal; and,
(ii) the Joint Venture shall be
terminated and the Joint Venture
Committee shall be disbanded, as of
the effective date of the
withdrawal,
(iii) provided if Xxxxxx is the
Withdrawing Party and provided it
has satisfied the provisions of 3.6
(a) (i) (A) and (B), it shall be
entitled to retain the 2% net
smelter royalty set out in Schedule
B hereto as long as it continues to
honour any other provisions of this
agreement that extend beyond
withdrawal.
(b) Upon receipt of a notice of withdrawal pursuant to section
3.6(a), the Remaining Party may give notice to the Withdrawing
Party prior to the effective date of the withdrawal electing
to join in the withdrawal, in which event the Joint Venture
shall be terminated on receipt of such notice by the
Withdrawing Party, the assets of the Joint Venture shall be
forthwith liquidated and the proceeds obtained from such
liquidation shall be distributed in proportion to each party's
Participating Interest.
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4. MISCELLANEOUS
4.1 XXXXXX ROYALTY
Xxxxxx shall retain a 2.0% net smelter returns royalty to be calculated
and paid in accordance with the provisions of Schedule B attached hereto.
4.2 YUKON GOLD BOARD OF DIRECTORS
While this Agreement remains in effect, Xxxxxx shall be entitled to
recommend for appointment not less than one member to the board of directors of
Yukon Gold.
5. GENERAL PROVISIONS
5.1 NATURE OF RELATIONSHIP
In every case, the obligations of each party under this
Agreement shall be several and shall not be construed to be either
joint or joint and several and nothing herein shall be construed as
creating a partnership between the parties. Subject to sections 5.7 and
5.9(a), nothing contained in this Agreement shall be construed so as to
constitute a party an agent or legal representative of another party.
Except as otherwise specifically provided in this Agreement, a party
shall not have any authority to act for, or to assume any obligation or
responsibility on behalf of, any other party. Except as expressly
provided in this Agreement, each party shall have the free and
unrestricted right to independently engage in and receive the full
benefits of any and all business endeavours of any sort whatsoever not
related to the Property and the area of interest, whether or not
competitive with the endeavours contemplated herein, without consulting
or inviting or allowing the other party any interest therein and the
legal doctrines of "corporate opportunity" or "business opportunity"
sometimes applied to joint venturers shall not apply in the case of
such other endeavours, as all fiduciary duties arising from the Joint
Venture and owed by one party to another have been specifically
outlined in this Agreement
5.2 AREA OF INTEREST
The area of interest shall be deemed to comprise that area which is
included within ten (10) kilometres of the outermost boundary of the mineral
properties, which constitute the Property.
5.3 ADDITIONAL ACQUISITION
If at any time during the subsistence of this Agreement any party (in
this Article only called the "Acquiring Party") stakes directly or indirectly or
purchases any mining claim, licence, lease, grant, concession, permit, patent,
or other mineral property (in this Article 5 a "Mineral Property") located
wholly or partly within the area of interest referred to in Section 5.2, the
Acquiring Party shall forthwith give notice to the other parties of that staking
or acquisition and proof of the cost thereof and all details in the possession
of that party with respect to the nature of the property and the known
mineralization.
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5.4 ELECTION TO ACQUIRE
Each other party may, within thirty (30) days of receipt of the
Acquiring Party's notice, elect, by notice to the Acquiring Party, to require
that the Mineral Property which was staked or otherwise acquired be included in
and thereafter form part of the Property for all purposes of this Agreement. If
the election is made, all the other parties shall reimburse the Acquiring Party
for that portion of the cost of staking or acquiring which is equivalent to
their respective Interests. If no other party makes the election within that
period of thirty (30) days, the Mineral Property, which was staked or acquired
shall not form part of the Property and the Acquiring Party shall be solely
entitled thereto. Should any party acquire mineral claims that fall within the
Area of Interest prior to Yukon Gold earning a 75% interest in the Property, and
should Yukon Gold elect to have the claims included and form part of the
Property if acquired by other parties, the cost shall be born 100% by Yukon Gold
and shall be part of the Work Program Costs.
5.5 CONFIDENTIAL INFORMATION
All data and information provided to or received by the parties with
respect to the Property shall be treated as confidential. A party shall not
disclose such information to third parties whether by way of press release or
otherwise, unless the disclosure is required by law, stock exchange rules or a
regulatory authority having jurisdiction or the disclosure is consented to by
the other party (the "Non-Disclosing Party"); consent of such Non-Disclosing
Party shall not be unreasonably withheld or delayed in view of the parties'
timely disclosure obligations. Without limiting the foregoing, the
Non-Disclosing Party may reasonably withhold its consent to the issuance of a
press release where it has not been provided with an advance draft copy of such
press release. Where disclosure is required by law, stock exchange rules or a
regulatory authority having jurisdiction, a party shall, if permitted by such
law, stock exchange rule or regulatory authority, use its reasonable best
efforts to provide a copy of the information to be disclosed (the "Disclosure
Statement") to the Non-Disclosing Party in advance of its disclosure and make
reasonable changes to such Disclosure Statement as may be requested by the
Non-Disclosing Party.
5.6 GEOLOGICAL INTERPRETATIONS
No party (the "Reporting Party") shall be liable to another party (the
"Receiving Party") in respect of any opinions, findings, conclusions or other
non-factual information included by the Reporting Party in any report or other
document provided to the Receiving Party, whether included by negligence or
otherwise. Each party hereby indemnifies and saves harmless the other from and
against all suits, claims, demands, losses and expenses arising in respect of
the release by a Receiving Party of such non-factual information in such report
or other document to third parties, irrespective of whether such release was
consented to by the Reporting Party.
5.7 GST
Although each of the parties to this Agreement recognizes that it is
responsible to separately account and, where necessary, register for the federal
Goods and Services Tax (the "GST"), it is agreed and the parties hereto elect
that the Operator shall be the registrant for the GST with respect to this
Agreement and shall account for the GST on all properties, mineral interests and
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goods and services acquired or supplied pursuant to the terms of this Agreement
with all such actions deemed to have been made by the Operator. The parties
hereto authorize the Operator to do such acts and execute such documents, and
shall themselves do such further acts and execute and deliver such further
documents, as may be reasonably necessary and desirable to give effect to the
election contained in this section 5.7.
5.8 TIME
This Agreement shall be effective from and as of the 30th day of May
2002.
5.9 ASSIGNEES, SUCCESSORS AND RELEASES
(a) (i) No party shall sell, transfer, assign or otherwise
dispose of (the "Sell") all or any portion of its
right, title and interest in and to the Property or
its rights and obligations under this Agreement (the
"Interest") except:
(A) pursuant to an agreement in which the
consideration is expressed wholly in lawful
money of Canada;
(B) as a single transaction not directly or
indirectly part of some other sale or
purchase or agreement of any nature
whatsoever; and,
(C) otherwise in accordance with this section
5.9.
(ii) If any of Xxxxx, Xxxxx or Xxxxxx (the "Sellor")
receives a bona fide offer from a third party to Sell
all or any portion of its Interest (the "Offered
Interest") and intends to accept such offer (the
"Offer"), the Sellor, prior to accepting the Offer,
shall give notice in writing to Yukon Gold (the
"Purchaser") of the Offer together with a copy of the
Offer, which shall be in written form (the "Offer
Notice"). Xxxxx, Xxxxx and Xxxxxx may sell to each
other without complying with this provision.
(iii) An Offer Notice shall be deemed to constitute an
offer (the "1st Offer") by the Sellor to the
Purchaser to Sell the Offered Interest on the terms
and conditions set out in the Offer Notice and shall
be open for acceptance by the Purchaser for a period
of 60 days from the date of its receipt by the
Purchaser. Such Offer Notice shall clearly identify
the person or persons making the Offer and include
such information as is known by the Sellor about such
person or persons.
(iv) If the Purchaser gives notice to the Sellor electing
to accept the 1st Offer within the 60 day period,
such acceptance shall constitute a binding agreement
of purchase and sale between the Sellor and the
Purchaser in respect of the Offered Interest on the
terms and conditions set out in the Offer Notice.
(v) If the Purchaser does not accept the 1st Offer within
the 60 day period, the Sellor may complete a sale and
purchase of the Offered Interest to the person or
persons making the Offer on the terms and conditions
set out in the Offer Notice and such sale and
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purchase shall be completed within 100 days of the
expiration of the right of the Purchaser to accept
the 1st Offer provided for in this section 5.9(a),
failing which the Sellor must again comply with the
provisions of this section 5.9(a) in respect to a
sale and purchase of the Offered Interest.
(vi) The Sellor may Sell all or any portion of its
Interest to an affiliate of the Sellor. For purposes
of clarity, such sale, transfer, assignment or
disposal is not subject to section 5.9(a), provided,
however, that if control over such affiliate is
immediately transferred to a third party or if such
transaction is merely an attempt at avoiding the
provisions of section 5.9(a) then the provisions of
section 5.9(a) shall be deemed to apply to such
transaction and such transaction shall have no
effect, unless the Purchaser subsequently declines to
exercise its right to acquire the Offered Interest
pursuant to section 5.9(a).
(vii) For purposes of this Agreement, "affiliate" is used
to indicate a relationship between: (A) corporations
where one of them owns or holds, directly or
indirectly, voting securities carrying a majority of
the voting rights attached to all outstanding voting
securities of the other (if two corporations are
affiliated with another corporation by reason of the
percentage of their voting securities held or owned,
directly or indirectly, by such other corporation,
then they shall be deemed to be affiliated with each
other); (B) a person and a corporation where the
person, the person's spouse or, if living in the same
home as the person, the person or the spouse's
relative, beneficially owns, directly or indirectly,
voting securities carrying a majority of the voting
rights attached to all outstanding voting securities
of the corporation; and (C) one person and another
person where the other person is the spouse, or any
relative of the person or the spouse where the spouse
or relative has the same home as the person.
(b) This Agreement shall be binding upon and enure to the benefit
of the parties' successors and permitted assignees, provided,
however, that any assignment by the Sellor of all or any
portion of its rights or obligations hereunder shall include a
provision whereby the New Party agrees to abide by the terms
of this Agreement, including the provisions of this section
5.9, and assume all of the liabilities and obligations of the
Sellor under this Agreement, whether accruing before or
becoming due after such assignment. The Sellor and New Party
shall execute such agreements or documents as may be
reasonably required in this regard by the other party to this
Agreement (the "Other Party").
(c) No assignment shall serve to release or discharge the Sellor
from any of the said liabilities or obligations, unless all of
the rights and obligations of the Sellor have been assigned to
the New Party and the Other Party has released the Sellor.
(d) Nothing in this section 5.9 shall prevent a party from
soliciting offers from third parties to purchase its Interest.
Notwithstanding the foregoing part of this section 5.9(d) and
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for purposes of clarity, neither Yukon Gold nor any of Xxxxx,
Xxxxx or Xxxxxx shall make offers to third parties to sell its
Interest if the effect of such an offer would avoid the
application of the provisions of section 5.9(a).
5.10 FORCE MAJEURE
(a) No party hereto shall be liable under this Agreement to
another party for any failure to perform any of its
obligations caused by or arising out of any act not within the
control of the party, excluding lack of funds, but including,
without limitation, acts of God, strikes, lockouts or other
industrial disputes, acts of a public enemy, riots, fire,
storm, flood, explosion, government restriction, failure to
obtain any approvals required from regulatory authorities,
including environmental protection agencies, unavailability of
equipment, interference of persons primarily concerned about
environmental or native rights issues and any other cause,
whether of the kind enumerated above or otherwise, which is
not reasonably within the control of the party (the "Event of
Force Majeure").
(b) No right of a party shall be affected, and no party shall be
found in default, under this Agreement by the failure of such
party to meet any term or condition of this Agreement where
such failure is caused by an Event of Force Majeure and, in
such event, all times specified or provided for in this
Agreement shall be extended by a period commensurate with the
period during which the Event of Force Majeure causes such
failure.
(c) A party affected by an Event of Force Majeure shall take all
reasonable steps within its control to remedy the failure
caused by such event, provided, however, that nothing
contained in this section 5.10 shall require any party to
settle any labour or industrial dispute or to test the
constitutionality of any law enacted by any Legislature or
Parliament of or within Canada.
(d) Any party relying on the provisions of this section 5.10 shall
forthwith give notice to the other party of the commencement
of an Event of Force Majeure and of its end.
5.11 NOTICES
(a) Any notice, direction or other communication (the "Notice")
given hereunder, irrespective of whether such Notice was
required, permitted or otherwise provided pursuant to or in
respect of this Agreement, shall be in writing and:
(i) if delivered, shall be deemed to have been given and
received on the day it was delivered;
(ii) if mailed, shall be deemed to have been given and
received on the seventh business day following the
day of mailing, except in the event of disruption of
postal services in which event such Notice shall be
deemed to have been given and received only when
actually received;
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(iii) if sent by telefacsimile shall be deemed to have been
given and received on the day it was so sent, except
where sent outside of normal business hours (9:00
a.m. to 5:00 p.m. local time at the place of
receipt), in which event such Notice shall be deemed
to have been given and received on the next following
business day; and
(iv) for greater clarity, Xxxxxx will be deemed to have
been given and received Notice effective upon the
first of Xxxxx, Xxxxx and Xxxxxx receiving Notice
pursuant to this section 5.11.
(b) Notices in each case shall be addressed as follows:
(i) IF TO YUKON GOLD, AT:
Yukon Gold Corp.
Xxxxx 000, 000 Xxx Xxxxxx
Xxxxxxx, Xxxxxxx, X0X 0X0
Attention: President
Fax: (000) 000-0000
WITH A COPY TO:
Xxxxxxx Xxxxx LLP
Suite 3900, Canada Trust Tower
BCE Place, 000 Xxx Xxxxxx
Xxxxxxx, Xxxxxxx X0X 0X0
Attention: Xxxxxxx Xxxxxxx
Fax: (000) 000-0000
(ii) if to Xxxxxx, to each of:
Xxxxxxx Xxxxx
Xxx 000
Xxxx, Xxxxx X0X 0X0
Fax: (000) 000-0000
Xxxxx X. Xxxxx
0000 Xxxx Xxxxx
Xxxxxxxxx, XX X0X 0X0
Fax: (000) 000-0000
Xxxxxx Xxxxxx
Xxxx 0, Xxx 0
Xxxx Xxxx, Xxxxx X0X 0X0
Fax: (000) 000-0000
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Any party may give, at any time, notice in writing to the
other party of any change of address of the party giving such
Notice and, from and after the giving of such Notice, the
address or addresses therein specified shall be deemed to be
the address of such party for the purpose of giving Notice
hereunder.
(c) Any Notice given hereunder to the Joint Venture Committee
shall be in writing and shall be delivered, mailed or sent to
Yukon Gold and Xxxxxx, in accordance with this section 5.11.
5.12 INTERPRETATION
(a) This Agreement shall be interpreted and governed according to
the laws of the Province of Ontario. The parties hereby attorn
to the jurisdiction of the courts of the Province of Ontario
and agree to submit any disputes in respect of this Agreement
to the courts of the Province of Ontario.
(b) All references in this Agreement to monetary amounts are
expressed in Canadian currency.
(c) In this Agreement, headings have been inserted for ease of
reference and may not accurately describe the provisions that
follow them. Consequently, headings shall not be used for
purposes of interpreting this Agreement.
(d) In this Agreement, the singular encompasses the plural and
vice versa, and the masculine encompasses the feminine and
vice versa.
(e) In this Agreement, mining properties, rights or interests into
which any of the Claims are converted by process of law or
otherwise are included in the definition of Property.
5.13 OPTION TO PURCHASE
At anytime following the formation of the Joint Venture as defined in
Article hereof and provided Yukon Gold has a 75% Earned Interest in the
Property, Yukon Gold shall have the option to purchase the remaining
25% interest held by the Xxxxxx Syndicate.
The purchase price shall be $5,000,000 and the Xxxxxx Syndicate's NSR
shall be increased from 2% to 3% following the buy out. This option
shall remain in effect until the Xxxxxx Syndicate is required to commit
to funding their interest in the Joint Venture at which time Yukon Gold
must exercise the option or it shall expire and be of no further force
or effect.
5.14 WHOLE AGREEMENT AND FURTHER ASSURANCES
(a) This letter, including Schedules [A, A1, B, and C] attached
hereto, constitutes the whole of this Agreement and
encompasses the entire agreement between Yukon Gold and Xxxxxx
pertaining to the Property. This Agreement supersedes all
prior agreements, understandings, negotiations and
discussions, whether oral or written, between Yukon Gold and
-25-
Xxxxxx, and there are no warranties, representations or other
agreements between Yukon Gold and Xxxxxx in connection with
the Property, except as specifically set forth herein.
(b) The parties agree to execute and cause to be executed such
other documents, and take and cause to be taken such other
actions, as are reasonably necessary: (i) to secure and give
effect to the rights and obligations granted and assumed
hereunder; and (ii) to maintain the Property in good standing.
5.15 ENVIRONMENTAL RECLAMATION
(a) Notwithstanding any other provision in this Agreement, Xxxxxx
shall remain liable and Yukon Gold shall have no obligations
in respect of environmental liabilities incurred or arising as
a result of the state or condition of the Property prior to
the effective date of this Agreement.
(b) For purposes of section 5.14(a), environmental liabilities
shall mean any and all damages (including but not limited to
exemplary and punitive damages), losses, costs, expenses,
liabilities and obligations of whatsoever kind, direct or
indirect (including but not limited to fines, penalties,
interest, lawyers' fees and expenses, damages for personal
injury, death, property damage and economic loss, including
but not limited to reduction in the value of the Property (or
any other person's property)) incurred or arising as a result
of the state or condition of the Property, including costs
relating to the removal, treatment, storage and disposal of
hazardous substances and the remediation, clean-up,
restoration, abatement, reclamation or other securing or
remedial action in respect of the Property (or any other
person's property) under or for breach of or failure to comply
with any and all environmental laws, whether statutory, in
contract or in tort, including negligence and strict
liability, or howsoever otherwise arising.
(c) For purposes of sections 2.5(b), 3.5(c) and 5.14(b):
(i) environmental laws shall mean any and all federal,
provincial and local laws, statutes, rules,
regulations, ordinances, bylaws, orders, permits,
licences, approvals, policies and consents and the
common law to the extent that any of the foregoing
regulate, ascribe, provide for or pertain to
liabilities or obligations in relation to the
existence, use, production, manufacture, processing,
distribution, production, transport, handling,
storage, removal, treatment, disposal, emission,
discharge, migration, seepage, leakage, spillage or
release of hazardous substances or the construction,
alteration, use or operation, demolition or
decommissioning of any facilities or other real or
personal property in relation to the
-26-
foregoing or otherwise in relation to the protection
of the life, health or safety of persons, or to the
protection of property or the environment, including
but not limited to air, soil, surface water, ground
water, biota, wildlife and personal or real property;
and
(ii) hazardous substances shall mean any substance that:
(A) when released to the natural environment is
likely to cause or does cause, immediately
or at some future time, material harm or
degradation to the natural environment or
any risk to human health and, without
restricting the generality of the foregoing,
includes any pollutant, contaminant, waste
or hazardous waste, or any "dangerous
goods", "hazardous chemical", "hazardous
substance" or "hazardous waste", as may be
defined by environmental laws; or
(B) exhibits characteristics of flammability,
corrosivity, reactivity or toxicity.
5.16 COUNTERPARTS
This Agreement may be executed in multiple counterparts, each of which
shall be deemed an original, and all of which together shall constitute one and
the same instrument. Execution and delivery of this Agreement by exchange of
facsimile copies bearing facsimile signature of a party shall constitute a valid
and binding execution and delivery of this Agreement by such party. Such
facsimile copies shall constitute enforceable original documents.
IN WITNESS WHEREOF the parties have executed this Agreement effective
as of the date first written above,
ON HIS OWN BEHALF AND ON BEHALF OF THE YUKON GOLD CORP.
XXXXXX SYNDICATE:
/s/ Xxxxxxx Xxxxx by: /s/ Xxxxx Xxxxx
----------------------------------------- -------------------------------
Xxxxxxx Xxxxx Xxxxx Xxxxx
President
/s/ Xxxxx Xxxxx by: /s/ Xxxxxxxx Xxxxxx
----------------------------------------- --------------------------------
Xxxxx Xxxxx Xxxxxxxx Xxxxxx
Treasurer
/s/ Xxxxxx Xxxxxx
Xxxxxx Xxxxxx
/s/ J. Xxxxxxx Xxxxx
-----------------------------------------
J. Xxxxxxx Xxxxx
-27-
SCHEDULE A
TO
XXXXXX / YUKON GOLD AGREEMENT
DATED JULY 7, 2002
DESCRIPTION OF XXXXXX PROPERTIES
CLAIM NAME CLAIM NO. RECORD NO. EXPIRY DATE
---------- --------- ---------- -----------
Xxxxxx Claims 1 - 34 YC00401-434 Xxxxxxx Xxxxx - Exp. 2002/09/10
Xxxxxx 35 YC01091 Xxxxxxx Xxxxx - Exp. 2002/09/10
Hinton II Claims 1 - 26 YC01126-151 Xxxxxx Xxxxxx - Exp. 2002/09/10
Xxxxxx III Claims 1 - 14 YC01152-165 Xxxxxx Xxxxxx - Exp. 2002/09/10
Hinton IV Claims 1 - 6 YC01424-429 Xxxxxx Xxxxxx - Exp. 2002/09/10
Xxxxxx V Claims 1 - 7 YC01417-423 Xxxxxx Xxxxxx - Exp. 2002/09/10
A TOTAL OF 88 CLAIMS
SCHEDULE A1
NEW CLAIMS LIST
CLAIM STATUS REPORT 29 OCTOBER 2003
CLAIM NAME AND NBR GRANT NO. EXPIRY DATE REGISTERED OWNER % OWNED NTS #'X
X Xxxxxx 0 - 0 XX00000 - XX00000 2011/11/01 Yukon Gold Corp 100.00 105M14 X
X Xxxxxx 0 - 00 XX00000 - XX00000 2011/11/01 Yukon Gold Corp 100.00 105M14
R Xxxxxx 00 - 00 XX00000 - XX00000 2007/11/01 Yukon Gold Corp 100.00 105M14 X
X Xxxxxx 00 - 00 XX00000 - XX00000 2007/11/01 Yukon Gold Corp 100.00 105M14
R Xxxxxx 35 YC01091 2011/11/01 Yukon Gold Corp 100.00 105M14 X
X Xxxxxx XX 0 - 00 XX00000 - XX00000 2011/11/01 Yukon Gold Corp 100.00 105M14
R Hinton II 12 YC01137 2010/11/01 Yukon Gold Corp 100.00 105M14
X Xxxxxx XX 00 - 00 XX00000 - XX00000 2011/11/01 Yukon Gold Corp 100.00 105M14
R Hinton II 23 YC01148 2010/11/01 Yukon Gold Corp 100.00 105M14
X Xxxxxx XX 00 - 00 XX00000 - XX00000 2011/11/01 Yukon Gold Corp 100.00 105M14
X Xxxxxx XXX 0 - 0 XX00000 - XX00000 2008/11/01 Yukon Gold Corp 100.00 105M14
R Xxxxxx III 8 YC01159 2007/11/01 Yukon Gold Corp 100.00 105M14
X Xxxxxx XXX 0 - 00 XX00000 - XX00000 2008/11/01 Yukon Gold Corp 100.00 105M14
R Hinton IV 1 YC01424 2009/11/01 Yukon Gold Corp 100.00 105M14
R Xxxxxx XX 0 - 0 XX00000 - XX00000 2008/11/01 Yukon Gold Corp 100.00 105M14
R Xxxxxx V 1 - 4 YC01417 - YC01420 2008/11/01 Yukon Gold Corp 100.00 105M14
R Xxxxxx V 5 YC01421 2008/11/01 Yukon Gold Corp 100.00 105M14 X
X Xxxxxx V 6 YC01422 2008/11/01 Yukon Gold Corp 100.00 105M14
R Xxxxxx V 7 YC01423 2007/11/01 Yukon Gold Corp 100.00 105M14
R Xxx 0 - 00 XX00000 - XX00000 2012/11/01 Yukon Gold Corp 100.00 105M14
X Xxx 00 - 00 XX00000 - XX00000 2011/11/01 Yukon Gold Corp 100.00 105M14
R Key 13 YC10621 2012/11/01 Yukon Gold Corp 100.00 105M14
R Key 14 YC10622 2011/11/01 Yukon Gold Corp 100.00 105M14
R Key 15 YC10623 2012/11/01 Yukon Gold Corp 100.00 105M14
R Key 16 YC10624 2009/11/01 Yukon Gold Corp 100.00 105M14
R Key 17 YC10625 2012/11/01 Yukon Gold Corp 100.00 105M14
R Key 18 YC10626 2009/11/01 Yukon Gold Corp 100.00 105M14
X Xxx 00 - 00 XX00000 - XX00000 2009/11/01 Yukon Gold Corp 100.00 105M14
R Key 29 YC10629 2010/11/01 Yukon Gold Corp 100.00 105M14
R Key 30 YC10630 2009/11/01 Yukon Gold Corp 100.00 105M14
X Xxx 00 - 00 XX00000 - XX00000 2012/11/01 Yukon Gold Corp 100.00 105M14
X Xxx 00 - 00 XX00000 - XX00000 2009/11/01 Yukon Gold Corp 100.00 105M14
R Key 43 YC10643 2011/11/01 Yukon Gold Corp 100.00 105M14
R Key 44 YC10644 2012/11/01 Yukon Gold Corp 100.00 105M14
R Key 45 YC10645 2011/11/01 Yukon Gold Corp 100.00 105M14
R Key 46 YC10646 2012/11/01 Yukon Gold Corp 100.00 105M14
R Key 47 YC10647 2011/11/01 Yukon Gold Corp 100.00 105M14
R Key 48 YC10648 2012/11/01 Yukon Gold Corp 100.00 105M14
X Xxx 00 - 00 XX00000 - XX00000 2011/11/01 Yukon Gold Corp 100.00 105M14
Total claims selected: 186
Left column indicator legend:
R - Indicates the claim is on one or more pending renewal(s).
P - Indicates the claim is pending.
Right column indicator legend:
L - Indicates the Quartz Lease.
F - Indicates Full Quartz fraction (25+ acres)
P - Indicates Partial Quartz fraction (<25 acres)
D - Indicates Placer Discovery
C - Indicates Placer Codiscovery
B - Indicates Placer Fraction
PAGE 1 OF 2
CLAIM STATUS REPORT 29 OCTOBER 2003
CLAIM NAME AND NBR GRANT NO. EXPIRY DATE REGISTERED OWNER % OWNED NTS #'S
R Key 57 - 62 YC10651 - YC10656 2011/11/01 Yukon Gold Corp 100.00 105M14
X Xxx 00 - 00 XX00000 - XX00000 2012/11/01 Yukon Gold Corp 100.00 105M14
R Key 89 YC10677 2011/11/01 Yukon Gold Corp 100.00 105M14
X Xxx 00 - 00 XX00000 - XX00000 2012/11/01 Yukon Gold Corp 100.00 105M14
R Key 000 - 000 XX00000 - XX00000 2012/11/01 Yukon Gold Corp 100.00 105M14 F
R Key 000 - 000 XX00000 - XX00000 2012/11/01 Yukon Gold Corp 100.00 105M14
R Key 104 YC10697 2012/11/01 Yukon Gold Corp 100.00 105M14 F
Moon 1 YC10957 2004/09/09 Yukon Gold Corp 100.00 105M14 X
Xxxx 0 - 00 XX00000 - XX00000 2004/09/09 Yukon Gold Corp 100.00 105M14
Xxx 0 - 0 XX00000 - XX00000 2004/09/09 Yukon Gold Corp 100.00 105M14
CRITERIA(S) USED FOR SEARCH:
CLAIM STATUS: ACTIVE & PENDING OWNER(S): YUKON GOLD CORP REGULATION TYPE: QUARTZ
Total claims selected: 186
Left column indicator legend:
R - Indicates the claim is on one or more pending renewal(s).
P - Indicates the claim is pending.
Right column indicator legend:
L - Indicates the Quartz Lease.
F - Indicates Full Quartz fraction (25+ acres)
P - Indicates Partial Quartz fraction (<25 acres)
D - Indicates Placer Discovery
C - Indicates Placer Codiscovery
B - Indicates Placer Fraction
PAGE 2 OF 2
SCHEDULE B
TO
XXXXXX / YUKON GOLD AGREEMENT
DATED JULY 7, 2002
NET SMELTER RETURN ROYALTY
1. The NSR which may be payable to a party (the "PAYEE") by a party (the
"PAYOR") shall be calculated and paid to the Payee in accordance with
the terms of this Schedule.
2. The NSR shall be calculated on a calendar quarterly basis.
3. The following words shall have the following meanings:
3.1 "GROSS REVENUE" shall mean the aggregate of the following
amounts received in each quarterly period:
(a) (i) all revenue received by the Payor in such
quarter from arm's length purchasers of
mineral products, or
(ii) the fair market value of all mineral
products sold by the Payor in such quarter
to persons not dealing at arm's length with
the Payor; and
(b) any proceeds of insurance received in such quarter
due to losses or damages in respect to mineral
products.
3.2 "PERMISSIBLE DEDUCTIONS" shall mean the aggregate of the
following charges (to the extent not previously deducted or
accrued in computing Gross Revenue) that are paid in each
quarterly period:
(a) sales charges levied by any sales agent in respect to
the sale of mineral products;
(a) all costs, expenses and charges of any nature
whatsoever which are either paid or incurred by the
Payor in connection with the refinement or
beneficiation of mineral products after leaving the
Property, including all weighing, sampling, assaying
and representation costs, metal losses, any umpire
charges and any penalties charged by the processor,
refinery or smelter, and;
(b) all other insurance costs in respect of mineral
products;
provided: (i) that where a cost or expense otherwise
constituting a Permissible Deduction is incurred by the Payor
in a transaction with a party with whom it is not dealing at
arm's length (as that term is defined in the Income Tax Act
(Canada)), such costs or expenses may be deducted, but only as
to the lesser of the actual cost incurred by the Payor and the
-2-
fair market value thereof considering the time of such
transaction and under all the circumstances thereof; and (ii)
transportation costs and milling costs at another site, prior
to the smelting and refining shall not be included in the
definition of Permissible Deductions.
3.3 "NET SMELTER RETURNS" shall mean Gross Revenue less
Permissible Deductions in respect to such quarter.
3.4 "NSR" shall mean Net Smelter Returns.
4. The NSR shall be calculated and paid within 30 days after the end of
each calendar quarter ending March 31, June 30, September 30 and
December 31 of each year. Smelter settlement sheets, if any, and a
statement setting forth calculations in sufficient detail to show how
the payment was derived (the "STATEMENT") shall be submitted with the
payment.
5. In the event that final amounts required for the calculation of the NSR
are not available within the time period referred to in paragraph 4 of
this Schedule, then provisional amounts shall be established, the NSR
shall be paid on the basis of such provisional amounts and positive or
negative adjustments shall be made to the payment in the succeeding
quarter, as necessary.
6. All NSR payments shall be considered final and in full satisfaction of
all obligations of the Payor with respect thereto, unless the Payee
delivers to the Payor a written notice (the "OBJECTION NOTICE")
describing and setting forth a specific objection to the calculation
thereof within 60 days after receipt by the Payee of the Statement. If
the Payee objects to a particular Statement as herein provided, the
Payee shall, for a period of 60 days after the Payor's receipt of such
Objection Notice, have the right, upon reasonable notice and at a
reasonable time, to have the Payor's accounts and records relating to
the calculation of the NSR in question audited by the auditors of the
Payor. If such audit determines that there has been a deficiency or an
excess in the payment made to the Payee, such deficiency or excess will
be resolved by adjusting the next monthly NSR payment due hereunder.
The Payee shall pay all the costs and expenses of such audit unless a
deficiency of 2 1/2% or more of the amount due is determined to exist.
The Payor shall pay the costs and expenses of such audit if a
deficiency of 2 1/2% or more of the amount due is determined to exist.
All books and records used and kept by the Payor to calculate the NSR
due hereunder shall be kept in accordance with Canadian generally
accepted accounting principles. Failure on the part of the Payee to
make claim against the Payor for adjustment in such 60 day period by
delivery of an Objection Notice shall conclusively establish the
correctness and sufficiency of the Statement and NSR payment in respect
of the applicable quarter.
7. All profits and losses resulting from the Payor engaging in any
commodity futures trading, option trading, metals trading, gold loans
or any combination thereof, and any other hedging transactions with
respect to mineral products (collectively, "HEDGING TRANSACTIONS") are
specifically excluded from calculations of the NSR pursuant to this
Schedule, it being understood by the parties that both the Payor and
Payee may engage in speculative hedging trading activities for their
own account. All Hedging Transactions by the Payor and all profits or
losses associated therewith, if any, shall be solely for the Payor's
account, irrespective of whether or not mineral products are delivered
in fulfilment of such obligations. When necessary to give effect to the
-3-
provisions of this paragraph 7, Gross Revenue from mineral products
subject to Hedging Transactions by the Payor shall be determined
pursuant to subclause 3.1(a)(ii), rather than 3.1(a)(i) hereof.
8. Fair market value shall be determined by using, for gold, the quarterly
average price of gold which shall be calculated by dividing the sum of
all London Bullion Market Association P.M. Gold Fix prices reported for
the calendar quarter in question by the number of days for which such
prices were quoted and, for silver and other metals, the quarterly
average price which shall be calculated by dividing the sum of all New
York Commodity Exchange ("COMEX") prices reported for silver and the
other metal quoted by and at the closing of COMEX for the calendar
quarter in question by a number of days for which such prices were
quoted, less, in each case, an amount reasonably equivalent to the
deductions permitted by clause 3.2 hereof.
SCHEDULE C
PERCENTAGE INTEREST OF THE MEMBERS OF THE XXXXXX SYNDICATE
Xxxxxxx Xxxxx 51%
Xxxxx Xxxxx 16%
Xxxxxx Xxxxxx 17%
J. Xxxxxxx Xxxxx 16%
TOTAL 100%
